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Tuesday, December 13, 2016

Wave of the Future -- Be Your Own Boss

In July 2013, Stanford University published a report regarding the economic effects of the U.S. workforce aging. Though the report does not directly address causality, it is not a new revelation that companies continue to eject employees who are paid at the upper-end of the pay-scale, in order to show more "beautiful" numbers on the quarterly reports, without regard to maintaining functionality or productivity. Cannibalization of the workforce is an easy way for corporate management to retain the stock value in times when their lack of insight and risk aversion seem to rule the day, and their resulting ability to demonstrate growth are close to nil.

The enormous gap between top management compensation and worker compensation entices company executives to focus on their bonuses and "golden parachute" exit plans by putting the business emphasis on short-term financial reports, frequently at the cost of risking the stability and long term future of the business. Too many times we see a publicly traded company that demonstrates long-term positive income stream, however lacks a daily claim for short-term growth, being considered a stock market failure.

The prediction of flat growth curve in world economy for the next decade and beyond has been discussed in many newspaper articles and books; therefore I will not cover this issue here. The common factor coming out of most report published on these subjects is that employers will not continue to offer generous benefits plans on top of increasingly higher salaries to their employees and most companies will resort to cost cutting measures including automation and reduced in-house employment.

For those of you who are willing to exercise free will and take some risk there is the avenue of self-employment. The charts below (taken from the Stanford Report) demonstrate that the future is leading us into this direction, whether we like it or not.

(click on the diagram to enlarge)

The most striking information that I learned from the last two years of studying the subject, is that it looks like the U.S. and the rest of the developed nations are going to face a shortage of skilled labor force over the next decade or two, due to the massive retirement of the Baby Boomer generation. This irreversible demographic trend will present us with some upheaval, as well as a lot of new opportunities, for those who are willing to pursue them. I highly recommend reading the report composed by the Conference Board at this link: What Labor Shortages Mean for Your Business.

The maps below show how skilled labor demand, due to major demographic changes are going to affect the job market for continental U.S.

(Click on image to enlarge)

Skill level and ability to put common sense into a complex business situation is typically better handled by older and more experienced workers. If company executives are getting rid of older employees in order to cut on payroll and employee benefit programs today, they may find themselves in trouble tomorrow.

The lack of long-term perspectives and practical experience gathered over the years, gives older employees a business advantage that cannot be easily matched by younger and inexperienced employees. This fact can be easily established when reviewing all recent job listings on the market--employers are looking for "experienced" employees, yet expect them to also be young, cheap, and peppy all at the same time. This "wishful thinking" approach will not stand the test of reality for very long. Employers will get what they pay for.

I contend that what this situation translates to is creation of new opportunities for experienced workers who are adept and highly productive and are wiling to forgo the typical corporate employee benefit plans in favor of high hourly wage and independence from any particular employer. In other words--highly compensated freelance work.

Click on the above to view TED Talk video, covering skilled labor shortages on YouTube

For those of you who are interested in reading the full Stanford report, it is available at: THE AGING US WORKFORCE -- A Chartbook of Demographic Shifts
Your comments are welcome.

All the best.

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